INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2014
TEAM No. 9- CLAIMANT
EAST CHINA UNIVERSITY OF POLITICAL SCIENCE AND LAW
(CHINA)
IN THE MATTER OF AN ARBITRATION HELD AT HONGKONG
MEMORANDUM FOR THE CLAIMANT
ON BEHALF OF:
AGAINST:
RELIABLE HOLDINGS INC.
SUPER CHARTERS INC.
“RELIABLE BUTTERLY”
RESPONDENT/OWNERS
CLAIMANT/CHARTERERS
TEAM NUMBER 9
TAN WEN, SONG HONG, JIANG SHENGLI,
FAN DI, ZHONG YAOYAO
I
MEMORANDUM FOR THE OWNERS
TABLE OF CONTENTS
Summary of Argument .......................................................................................................1
Summary of Facts ................................................................................................................ 1
ARGUMENTS PPESENTED ...........................................................................................3
1 The Charters’ claims against validity of arbitration proceeding must not be set
up. ............................................................................................................................................ 3
1.1 The Charterers are not entitled to rely on Time Bar Clause........................................3
1.2 Even through the Charterers could be relied on Time Bar Clause (which we
denied), discharge commencement date is not definitive. ....................................................4
1.3 Even through the Charterers could be relied on Time Bar Clause (which we
denied), discharge commencement date should not be counted from 10 January 2012.
........................................................................................................................................................... 5
1.4 Even through the Charterers could be relied on Time Bar Clause (which we
denied), the limitation time with 20 days is too short to comply with commercial
practice............................................................................................................................................ 6
1.5 It is under general commercial intention and true construction that Owners
commence the arbitration underlying Time Bar Clause......................................................6
2 The arbitration was duly commenced on 28 January and the Owners’ Claims
was not time barred............................................................................................................. 8
2.1 The arbitration has jurisdiction to hear these proceedings and British law should
be applied to this case. ................................................................................................................. 8
2.2 The appointment of Mr. Smith as the Owners’ arbitrator made in name of
Reliable Tanker Inc (‘RTI’) is valid and the arbitration is validly commenced
subsequently................................................................................................................................... 8
2.3 There was a clear misnomer in Owners’ notice of appointment, which did not
impact the commencement of arbitration. ..............................................................................9
2.4 The behavior of Charterers’ filing Defence & Counterclaim Submissions should
be regarded as its implied admission to the commencement of the arbitration...........10
3. The freight was duly earned by the Owners under the Charterparty and the
Charterers are liable to pay the freight and the resultant interests.......................11
3.1 The Charterparty between the Owners and the Charterers was concluded on 19
November 2011. .......................................................................................................................... 11
3.2 The Owners’ Standard Terms are incorporated into the Charterparty as part of it.
II
........................................................................................................................................................ 12
3.3 The approach voyage has commenced on 19 November 2011 and the Vessel
heading to the bunker port is part of the voyage. ...............................................................13
3.4 The advance freight is earned in full discounteless and non-returnable upon lifting
subjects that the Charterers are obliged to pay 95% of freight.......................................14
3.5 Even though the Charterparty was terminated by the Charterers thereafter, the
Charterers are still liable to pay the due freight. ................................................................16
4. The Owners are not liable for any damages arising from the delayed arrival.
............................................................................................................................................... 17
4.2 The Charterers should not cancel the contract based on laycan clause. .................18
4.3 The Charterers should not cancel the contract based on the warranty clause of
reasonable dispatch.................................................................................................................... 19
4.4 In presence of arguments above, the Owners are not liable for damages and losses
arising from delayed arrival. ...................................................................................................23
5. If the Charterers elect to cancel the contract based on the Owners Standard
Terms Clause 2, they should not claim any damages against the Owners. ..........23
5.1 The Owners’ Standard Terms Clause 2 applied...........................................................23
5.2 The Charterparty was cancelled in a “without recourse” way..................................23
5.3 The Charterers should not claim any damages against the Owners. .......................24
PRAYER FOR RELIEF ..................................................................................................25
III
LIST OF AUTHORITIES
CASES
Odfjfell Seachem v. Continentale Des Petroles [2005] 1 Lloyd’s Rep. 275.............4, 5
Pera Shipping Corporation v Petroship SA [1985] 2 Lloyd's Rep 103......................5
A/S. Renal v. Arcos, Ltd. [1937] 58 Lloyd’s Rep. 287...............................................6, 7
Metalimex Foreign Trade Corporation v. Eugenie Maritime Co. Ltd. [1962] 1 Lloyd’s
Rep. 378........................................................................................................................6
National Shipping Company of Saudi Arabia v. BP Oil Supply Company [2012] 1
Lloyd’s Rep. 18.............................................................................................................7
Bananaft International Co. S.A. v. Avant Petroleum Inc. [1982] 1 Lloyd’s Rep.
448.................................................................................................................................7
Bernuth Lines Limited v High Seas Shipping Limited [2005] EWHC 3020
(Comm).........................................................................................................................9
Dumford Trading AG v. Oao Atlantrybflot [2005] EWCA Civ
24...............................10
Investors Compensation Scheme Let v. West Bromwich Building Society (No.1) [1988]
1 W.L.R. 896. ..............................................................................................................10
Davies v. Elsby Brothers Ltd [1961] 1 WLR 170........................................................10
Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC
2909............11
Welex AG v Rosa Maritime Limited, [2002] EWHC 762 (Comm) ............................12
Sea Trade Maritime Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd
(The Athena), [2006] ..................................................................................................13
Automatic Electric Telephone Co. v. Union Steamship Co. Justice of Macdonald.....13
Compania Naviera General S.A. v. Kerametal Ltd. [1981] 2 Lloyd’s Rep.
559........14
The Karin Vatis, Vagres Compania Maritima S.A. v Nissho Iwai American
Corporation [1988] 2 Lloyd’s Rep. 330....................................................................15
The Dominique: Bank of Boston Connecticut) v European Grain & Shipping Ltd.
[1989] 1 Lloyd’s Rep 431......................................................................................15,16
Henriksens Rederi A/S v T.H.Z. Rolimpex [1973] 2 Lloyd’s Rep.
333........................15
The Aries: Aries Tanker Corporation v Total Transport Ltd. [1977] 1 Lloyd’s Rep.
334...............................................................................................................................15
The Alfa Nord: A/S Gunnstein & Co. K/S v Jensen, Krebs and Nielsen [1977] 2
Lloyd’s Rep. 434..........................................................................................................15
Mcdonald v Dennys Lascelles Ltd. [1933] 48 C.L.R. 457, 476-477............................16
The Simona [1988] 2 Lloyd's Rep. 199........................................................................18
Mihalis Angelos [1970] 2 Lloyd’s Rep. 43..................................................................18
Tidebrook Maritime Corporation v Vitol SA of Geneva [2006] EWCA Civ 944........18
The Mihalis Angelos [1971] 1 QB 164.........................................................................19
The Helvetia-S [1960] 1 Lloyd’s Rep 540.
..................................................................19
The Simona: Heymans v Darvins Ltd [1942] AC 356.................................................19
The Kriti Rex [1996] 2 Lloyd’s Rep 171......................................................................20
IV
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26.......21
The Seaflower: BS&N Ltd (BVI)v Micado Shipping Ltd [2001] 1 Lloyd`s Rep.341...21
The Wickman v Schuler [1974] AC 235........................................................................21
Mersey Steel & Iron Co. v. Naylor, Benzon & Co. [1884] 9 App. Cas. 434................22
Heyman v. Darwin, Ltd., [1942] A.C. 356.....................................................................22
Suisse Atlantique Societe’d Armement Martime S.A. v. N.V. Kolen Centrale [1967] 1
A.C.361..............................................................................................................................22
Cehave N.V. v. Bremer Handelsgesellschaft, [1976], Q.B. 44......................................22
Federal Commerce & Navigation Co. Ltd. v. Molena Alpha Inc., [1979] A.C.
757....................................................................................................................................22
Jackson v Union Marine Insurance Co [1874] LR 10 CP 125...............................22,24
The Madeleine [1967] 2 Lloyd’s Rep 224...................................................................24
STATUTES
Arbitration Act 1996(UK)..............................................................................................8
The Unfair Contracts Terms Act 197........................................................................24
OTHER AUTHORITIES
Lewison, The Interpretation of Contracts, 2nd Edition paragraph 11.15. .....................7
McKendrick, Ewan (2007). Contract Law (7th ed.)..................................................12
Laurence Koffman and Elizabeth Macdonald, The Law of Contract, (Oxford
University Press, 7th Edition) ....................................................................................13
John F Wilson , Carriage of Goods by Sea by 6th edition.....................................13,17
V
Summary of Argument
Reliable Holdings Inc. (‘Owners’) commenced arbitration against Super Charters Inc.
(‘Charterers’) for freight earned by Owners according to the Charterparty and
damages due to the cancellation of Charterparty by Charterers. Charterers excluded
Owners’ arbitration rights in light of the Time Bar Clause, which ignored the validity
of Time Bar Clause and proceeding of arbitration commencement. Further, the
Charterers are liable to pay the freight and the resultant interests earned by the
Owners under the Charterparty. Besides, the Owners should not bear liability of any
damages arising from the delayed arrival.
Summary of Facts
1.
Reliable Tankers Inc (RTI, the Owners), a renowned and trusted shipowner,
made a great deal with Super Charters Inc (the Charters) on 19 November 2011.
Through several twists and turns with contracting parties, the formal charterparty
got mutual consent and was attached to the E-mail sent by RTI on 19 November
2011.
2.
The Charterparty required Owners to transport 260,000mt crude oil from
Blueland (‘loading port’) to Indigoland (‘discharging port ’).
3.
As contract commenced, the vessel Reliable Butterfly had finished discharging
her last cargo a few days ago and started heading to her bunker port.
Unfortunately, the vessel was arrested at the bunker port for RTI’s arrearage to
the bunker suppliers. Despite constantly endeavor, the vessel could not be
1
released from arrest and the Owner was unable to give a revised laycan.
4.
Through the E-mail sent by the Charters on 27 November, the Charters indicated
that the Vessel could not meet her Laycan and they declined any revises
ETA/Laycan, which leading the cancellation of Charterparty. Moreover, the
Charters claimed for losses and damages due to the delay of vessel.
5.
On 28 November, Owners rejected that they were in breach, argued that they
were relieved of all liabilities by terms of “Cancellation Provision” in their
Standard Terms, and reminded that freight remained outstanding. In addition,
Owners suggested that they have a sister VLCC to Reliable Butterfly, which may
be suitable to perform the fixture in her place a few days later. However,
Charterers did not adopt this suggestion.
6.
On 3 January 2012, RTI was merged with Reliable Holding Inc. (RHI). On 28
January, according to the terms of Charterparty, an arbitration was taken in the
name of Reliable Tanker Inc. and appointed Mr. Smith as an arbitrator.
7.
However, the Charters considered the arbitration appointment as an invalid one
due to misnomer of Owners and the claims which were time-barred, while the
Charters still appointed Mr. John as arbitrator in the E-mail replied on 12
February 2012.
8.
On 24 February 2012, the Owners reiterated that notice of arbitration was a valid
one and RHI was the new merged entity on behalf of the Charters’ contractual
counterparty.
9.
On 14 March 2012, Owners submitted the letter of claim to arbitration. Owners
2
claimed a declaration of cancellation as set out, the sum of USD 4,935,368.75 by
the way of freight or damages, interest, costs, and further of other relief.
Charterers, however, counterclaimed that there are two references, that the first
reference commenced by Reliable Tanker Inc. was nullity, that Reliable Holding
Inc. was precluded the right to bring counterclaim in the second reference due to
the contractual time bar in Clause 4 of Charterers’ Stander Terms, and that RHI
was liable for damages of increasing freight, about USD 824,000, extra payment
to both loading port and discharging port for delayed arrival in amount of
USD450,000, other interest and costs.
ARGUMENTS PPESENTED
1 The Charters’ claims against validity of arbitration proceeding
must not be set up.
1.1 The Charterers are not entitled to rely on Time Bar Clause.
In light of the limitation defence by the Charters, arbitration should be commenced by
at latest 20 days after discharge or discharge would have taken place.1 However, the
Charters ignore whether Time Bar Clause2 should be applied to Owners, which rules
that Charters could be released from all liability in respect of any claims Owners may
have under this Charterparty unless an arbitration has been presented to Charters
within 20 days from discharge or of the date discharge should have taken place.3
Due to Charters’ cancellation of the Charterparty4, no cargo discharge would be
1
Facts, p109: Claim Submissions by Respondent par 3.
Facts, p 88: Standard Terms of Business by Respondent cl 4.
3 Facts, p 88: Standard Terms of Business by Respondent cl 4, Claimant’s letter dated 19 November 2011.
4 Facts, p 96: Respondent’s letter dated 27 November 2011.
3
2
finished or happened. Consequently, on the true construction of the charterparty the
owners’ claim for freight is not within Time Bar Clause and in circumstances where
there was no discharge and there was no contractual period within which the claim
had to be presented with full supporting documentation.5 Furthermore, the Charterers
have no prospect to defend the Owners’ claim on the grounds of the so-called
limitation defence successfully.
1.2 Even through the Charterers could be relied on Time Bar Clause (which we
denied), discharge commencement date is not definitive.
It is obvious that when no cargo has been discharged under the Charterparty,
commencement date under Time Bar Clause should be circulated from when
discharge would have taken place. Nevertheless, Charters garbled the letter from the
Owners sent on 19 November 2011 and unilaterally recognized the date when
discharge would have taken place was 10 January 20126, which was just the
estimation by Owners.
Therefore, under the circumstance that no definitive discharge commencement date
could not be affirmed, it is void to run from limitation of arbitration with an
uncertainty date of laytime commencement.
Furthermore, a time-bar clause must be clear and unambiguous if effect is to be given
to it. Thus, if there is any residual doubt about the matter, the ambiguity is to be
resolved in such a way as not to prevent an otherwise legitimate claim from being
5
6
Odfjfell Seachem v. Continentale Des Petroles [2005] 1 Lloyd’s Rep. 275.
Facts, p 89: Claimant’s letter dated 19 November 2011.
4
pursued7. Consequently, a Time Bar Clause with uncertain discharging time is quite
ambiguous and has no impediment to Owners’ proceeding right.
1.3 Even through the Charterers could be relied on Time Bar Clause (which we
denied), discharge commencement date should not be counted from 10 January
2012.
As to common business practice, there are various indeterminacies under carriage of
goods by sea, such as heavy weather or government action, like present case. Thus,
even if an experienced captain could not give a precise ETA without any revision.
There is no evidence putting forward to suggest what speed is the average vessel
sailing speed and warrant a probable length of contractual voyage.8
Moreover, as both parties affirmed9, the latest discharging finish time, due to
shutdown of refinery, was 15 January 2012. Therefore, the discharging
commencement date was between temporal intervals, which means, earliest start time
was 10 January, while latest start time was 15 January. Accordingly, the arbitration
was commenced at a proper time zone and not time barred.
1.4 Even through the Charterers could be relied on Time Bar Clause (which we
denied), the limitation time with 20 days is too short to comply with commercial
practice.
To say the least, even though Time Bar Clause10 is applicable (which we denied), the
7
Pera Shipping Corporation v Petroship SA ("The Pera") [1985] 2 Lloyd's Rep 103.
See Odfjfell Seachem v. Continentale Des Petroles [2005] 1 Lloyd’s Rep. 275.
9 Facts, p 89: Claimant’s letter dated 19 November 2011.
10 Facts, p 88: Standard Terms of Business by Respondent cl 4.
5
8
time limitation with 20 days is unconscionable. As to commercial customs, the time
limitation under Time Bar Clause will be 90 days, 180 days11, or even longer 12
months12.
For instance, the Aomoco Claims Clause where narrowing down Owners’ time
limitation against Charterers, incorporated into the Charterparty, the claim limitation
is reduced to more than 90 days. Comparatively, for the Owners’ perspective, 20 days
time limitation with regard to Owners’ claims against Charterers is properly out of
common business custom that the Owners consider such clause as invalid.
1.5 It is under general commercial intention and true construction that Owners
commence the arbitration underlying Time Bar Clause 13.
The commercial intention under Time Bar Clause seems to plainly ensure that claims
were made by the Owners within a short period of final discharge so that the claims
could be investigated and if possible resolved while the facts were still fresh.14
Moreover, the proper approach to the time bar clause was a requirement of clarity
sufficient to achieve certainty rather than a requirement of strict compliance which, if
applied inflexibly, could lead to uncommercial results.15 As a consequence, Owners
commenced the arbitration and notified the Charterers promptly, which is compliance
with the intention of Time Bar Clause.
11
See Odfjfell Seachem v. Continentale Des Petroles [2005] 1 Lloyd’s Rep. 275: “The limitation defence was
based on cl.20 of the chater-party which provided: …the claim within 90 days of the completion of discharge of
the cargo carried hereunder…with 180 days of the completion of discharge of the cargo carried hereunder.”.
12 See A/S. Renal v. Arcos, Ltd. [1937] 58 Lloyd’s Rep. 287: “Clause 24, which was as follow: Notice of any claim
under this charter or under any bill of lading given hereunder must be given within 12 months of the date of the
vessel’s arrival at final port of discharge otherwise all claims shall be deemed to be waived.”.
13 Facts, p 101: Claimant’s letter dated 28 January 2012.
14 Metalimex Foreign Trade Corporation v. Eugenie Maritime Co. Ltd. [1962] 1 Lloyd’s Rep. 378.
15 National Shipping Company of Saudi Arabia v. BP Oil Supply Company [2012] 1 Lloyd’s Rep. 18.
6
Furthermore, as we have discussed, the construction of Time Bar Clause should be
much looser. The especially exacting principles of construction that apply to
exemption clauses probably do not apply to time-bar provisions.16 Specifically, the
owner would not, as a matter of common sense, be debarred from making factual
corrections to claims presented in time, nor from putting a different legal label on a
claim previously presented.17 Hence, the arbitration commenced by Owners dated on
28 January with misnomer is quite valid, due to the reason that notice of claim does
not merely mean a precisely formulated claim with full details, but it must be a notice
as will enable the party to whom it is given to take steps to meet the claim by
preparing18.
2 The arbitration was duly commenced on 28 January and the
Owners’ Claims was not time barred.
2.1 The arbitration has jurisdiction to hear these proceedings and British law
should be applied to this case.
By the terms of the Charterparty19, the parties agreed that any dispute arising under or
in relation to or in connection with the Charterparty or the interpretation thereof or
arising in or out of or in connection with the performance or the Charterparty shall be
referred to arbitration in London in accordance with the 1996 Arbitration Act or
amendments thereto and any such arbitration award shall be final and binding upon
16
Lewison, The Interpretation of Contracts, 2nd Edition paragraph 11.15.
Bananaft International Co. S.A. v. Avant Petroleum Inc. [1982] 1 Lloyd’s Rep. 448.
18 A/S Rendal v. Arcos Ltd. [1937] 58 Lloyd’s Rep. 287.
19 Facts, p 49: ASBATANKVOY Part 2, CLS 24.
7
17
the parties thereto.
Since the disputes here arisen by the Owner is the result of the Charterers’ being in
breach of the Charterparty, they should be referred to arbitration according to the
terms (namely the arbitration clause) of the Charterparty mentioned above, which is
admitted by the Charterers and the Owners both.
2.2 The appointment of Mr. Smith as the Owners’ arbitrator made in name of
Reliable Tanker Inc (‘RTI’) is valid and the arbitration is validly commenced
subsequently.
According to Article 14(4) of the 1996 Arbitration Act,20 when sending out the notice
of appointment on 28 January, the arbitration (arbitral proceedings) should have
already been commenced by the Owner.21 And the Charterers’ suggestion that the
appointment is invalid and the arbitration has not been validly commenced because of
the title of arbitration is totally an opportunistic and ill-conceived one.
As at the time of commencement of the arbitration, RTI had merged by universal
succession with Reliable Holdings Inc (‘RHI’). And as a result of merger, an action in
the name of RTI was therefore necessarily an action by RHI. Besides, by way of
universal succession, the new entity RHI should inherit all the rights and obligations
from RTI, including substantive rights and procedural rights. 22
The arbitration was commenced using (very slightly) out of date headed notepaper in
20
Article 14(4) of the 1996 Arbitration Act,’Where the arbitrator or arbitrators are to be appointed by the parties,
arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties
notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in
respect of that matter.’
21 Bernuth Lines Limited v High Seas Shipping Limited [2005] EWHC 3020 (Comm).
22 Facts, p 113: Expert Report of Tim Bowman.
8
the name of RTI. And this clear misnomer has already been corrected by the claims
which the Owner submitted later23(on 14 March).
2.3 There was a clear misnomer in Owners’ notice of appointment, which did not
impact the commencement of arbitration.
There was a clear misnomer in Owners’ notice of appointment24 in that the Owners, in
error, thought that RTI was the current name of the contractual party under the
Charterparty. So the Owners just intended to appoint on behalf of the ‘owners’ under
the Charterparty, and the Charterers could have been under no genuine
misapprehension as to who was commencing the arbitration against it.
The maxim falsa demonstratio non nocet cum de corpore constat has often been
applied to correct a misnomer or mistaken designation25. Moreover, all that was
required was that it should be clear that something had gone wrong with the language
and that it should be clear what a reasonable person would have understood the
parties to have meant.26 Furthermore, In English law as a general principle the
question is not what the writer of the document intended or meant but what a
reasonable man reading the document would understand it to mean; and that is the test
which ought to be applied as a general rule in cases of misnomer.27 Thus, Owners
mis-headed title of letter which commenced the arbitration, while, in light of
commercial practice, there was no misunderstanding between mutual parties.
23
Facts, p 105: Claim Submissions by Claimant.
Facts, p 101: Claimant’s letter dated 28 January 2012.
25 Dumford Trading AG v. Oao Atlantrybflot [2005] EWCA Civ 24.
26 Investors Compensation Scheme Let v. West Bromwich Building Society (No.1) [1988] 1 W.L.R. 896.
27 Davies v. Elsby Brothers Ltd [1961] 1 WLR 170.
9
24
2.4 The behavior of Charterers’ filing Defence & Counterclaim Submissions
should be regarded as its implied admission to the commencement of the
arbitration.
The Charterers had already known the intact of the Owners’ appointment in the name
of RTI on 12 February, by stating ’We therefore consider that your appointment is
invalid.’ in the E-mail which it sent to the Owners. But it never submitted a formal
objection to this appointment or the arbitration which was commenced on 28 January
through the appointment mentioned above. Therefore, according to Article 73(1) of
the 1996 Arbitration Act,28 although the Charterers counterclaimed that the so called
‘first reference’ claimed by the Owners was a nullity on 14 march, it had already lost
the right to object to the arbitration which commenced on 28 January at that moment.,
and had no right to object to the validly commenced arbitration any longer.29
Moreover, the behavior of Charterers’ filing Defence & Counterclaim Submissions
should also be regarded as its implied admission to the commencement of the
arbitration claimed by the Owners through its appointment on 28 January on the other
hand.
28Article
73(1) of the 1996 Arbitration Act,’If a party to arbitral proceedings takes part, or continues to take part, in
the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or
the tribunal or by any provision of this Part, any objection(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings,
he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part
or continued to take part in the proceedings, he did not know and could not with reasonable diligence have
discovered the grounds for the objection.’
29 Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909.
10
3. The freight was duly earned by the Owners under the
Charterparty and the Charterers are liable to pay the freight and the
resultant interests.
3.1 The Charterparty between the Owners and the Charterers was concluded on
19 November 2011.
The Charterparty was concluded on 19 November 2011. The contract is considered to
be concluded when the fact is established that the two parties had come to a final and
complete agreement, for, if not, there was no contract. The E-mail sent to the Owners
by the Charterers on 10 October 2011 stating basic contractual requirements
constituted the invitation of offer.30 Then the content if the E-mail and the attached
recap sent to the Charterers by the Owners on 17 November 2011 constituted the offer.31
And the Charterers made the acceptance on 19 November 2011 through its E-mail by
stating, ’You have a deal’ and asking for a drawn up charter32. At last, the Owners
fully fixed with subjects by a revised recap before the deadline required by the
Charterers on the same day. Moreover, the Charterparty was concluded on 19
November 2011 and was established and legally binding the Owners and the
Charterers.
Recap is a binding agreement. Since the Recap33 was appended to the Standard
Charterparty, it also should be binding to both parties as part of the contract.34
30
See Facts, p2: Email of 10 October 2011.
See Facts, p4-p45: Email of 17 November 2011.
32 See Facts, p46: Email of 19 November 2011. Gibson v Manchester City Council [1978] 2 All ER 583. Lord
Denning, “but, as I understand the law, there is no need to llok for a strict offer and acceptance.”
33 Facts p51: Clean Recap.
34 Welex AG v Rosa Maritime Limited, [2002] EWHC 762 (Comm). Whilst a contract for chartering a ship is
normally embodied, in due course, in a printed form, the parties agreement can remain in the written fax or telex
exchanges: a signed Charterparty is unnecessary . In Welex AG v Rosa Maritime Limited, the court held that the
charterparty was the agreement contained in a recap telex and the standard form to which it referred. And this
explanation is consistent with the common commercial realities and accord with the duty on the Court to give an
intelligent meaning to documents surrounding this commercial transaction.
11
31
3.2 The Owners’ Standard Terms are incorporated into the Charterparty as part
of it.
The Owners’ Standard Terms appended to the E-mail on 19 November 201135 are
incorporated into the Charterparty that are binding to the Owner and the Charterer.
Parties entered into agreement on 19 Nov. 2011 as mentioned above. All clauses of
standard terms are under consideration by both parties pursuant to Clause 61 “Both
parties special terms fully incorporated as per attached.” in recap36 and both parties
are well acknowledged of all clauses of the Owner’s Standard Terms37.
Furthermore, Standard terms incorporated into contract are accepted by usual
practices in England. English law accepted incorporation of standard terms by the use
of general words and particularly so when the terms were readily available and the
question arose in the context of dealings between established players in a well-known
market.38
Therefore, the Owners’ Standard Terms are incorporated into the Charterparty as part
of it and all clauses are binding to both parties.
3.3 The approach voyage has commenced on 19 November 2011 and the Vessel
heading to the bunker port is part of the voyage.
The voyage under the Charterparty has commenced on 19 November. The Vessel
35
McKendrick, Ewan (2007). Contract Law (7th ed.). Palgrave Macmillan. The Standard Terms incorporation
satisfies the three steps that are required by the valid incorporation of terms.
36 Facts p51: Clean Recap.
37 The Law of Contract 7th Edtion, by Laurence Koffman and Elizabeth Macdonald (Oxford University Press)
38 See Sea Trade Maritime Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Athena), [2006]
EWHC 2530 (Comm) p735. In principle, English law accepted incorporation of standard terms by the use of
general words and particularly so when the terms were readily available and the question arose in the context of
dealings between established players in a well-known market. The principle did not distinguish between a term
which was an arbitration clause and one which addressed other issues.
12
Relibale Butterfly has been ready for Super Charterers on 16 November. On the same
day later of the Charterparty concluded, by email of 19 November sending from the
Owners39, the Vessel started heading to her bunker port. Since then until the Vessel
arriving the loading port, the Vessel was performed its preliminary voyage40. The
words during the voyage cover a preliminary voyage to the port of loading which has
been incorporated in the Charterparty.41 And that loading simply was part of the
voyage, but seemed to consider, that a preliminary voyage to a port to load and thence
to some objective port would, in the event of loading at some intermediate point, be
part of a voyage, as to the goods first loaded42. Such preliminary voyage, heading to
the bunker port was necessary and served for the Charterparty.
Therefore, the approach voyage has still commenced since the Vessel heading to the
bunker port. And the period from the Vessel at bunker port till arriving at loading port
pertaining to a preliminary voyage, during when, the Owner initiated to fulfill its
obligations under the Charterparty.
3.4 The advance freight is earned in full discounteless and non-returnable upon
lifting subjects that the Charterers are obliged to pay 95% of freight.
The freight is earned by the Owners in full discountless and non-returnable. On 19
November 2011, the Charterparty was concluded and therefore lifting subjects, which
was also admitted by the Charterers by their Claim Submission43. Pursuant to the
39
See Facts p89: Email of 19 November.
See Carriage of Goods by Sea by John F Wilson 6th edition (Pearson Longman). It will therefore be necessary
for the vessel to undertake a preliminary voyage to the agreed port of loading, and this will form the first stage in
the performance of the charterparty.
41 Automatic Electric Telephone Co. v. Union Steamship Co. Justice of Macdonald.
42 Ibid: Automatic Electric Telephone Co. v. Union Steamship Co. Justice of Macdonald.
43 See Facts p111: 19 of the Charterers’ Claim Submission.
13
40
Owners’ Standard Terms Clause 444, 95% of the freight was payable upon lifting
subject in discountless and non-returnable.
First, the freight was deemed earned in full upon lifting subjects. By case of the Lorna
I45, Court held that there was no obligation to make any payment of or on account of
freight until the expiration of the five-day period and if before the date of frustration
advance freight has fallen due it remains payable despite the frustration of the contract.
Analogous to our situations, the proper construction of the Freight Clause stipulated
in the Owners’ Standard Terms is that the advance freight payment fell due on the
date of lifting subjects. That is to say, the whole freight was deemed to earn46 on date
of lifting subjects, the debt fell due and should be paid discountless and nonreturnable.
Alternatively, Hobhouse J in case the Dominique47even hold that the debt existed and
deemed earned from the moment the Bills of lading were signed, “prepaid within five
days” nevertheless did not affect the accrual of the freight on the date of signing the
Bills of lading. The contrast between the Lorna I and the Dominique does not conflict
to our arguments. From another perspective, if the true construction of the freight
clause is the Owners only can earn the freight by arriving discharge port or
completing discharge, the consequence would be that there is no distinction between
44
Facts p87: Clause 4 of the Owners’ Standard Terms.
The Lorna I: Compania Naviera General S.A. v. Kerametal Ltd. [1981] 2 Lloyd’s Rep. 559; [1983] 1 Lloyd’s
Rep. 373. The freight clause is “16. Freight non-returnable cargo and/or vessel lost or not lost to be paid . . . to the
Owners . . . as follows: 75% . . . within 5 . . . days after Master signed Bills of Lading and the balance after right
and true delivery of the cargo and receipt of documents from discharging ports.”
46 “Deemed to earn” is the same of “earned”, see The Karin Vatis, Vagres Compania Maritima S.A. v Nissho Iwai
American Corporation [1988] 2 Lloyd’s Rep. 330.
47 The Dominique: Bank of Boston Connecticut) v European Grain & Shipping Ltd. [1989] 1 Lloyd’s Rep 431
14
45
freight prepaid and freight collect, which went against the purposes of advance freight.
Thus, 95% freight fell due on 19 November 2011 and it remains payable despite of
the later frustration and termination of the contract.
Secondly, such due freight payment is without discount. That means as long as the
freight falls due and remains unpaid, even the Charterers are entitled to claim
damages caused by the Owners, deduction from freight is not allowed by ordinary
practice48 in the case that the freight is agreed to be paid without discount. In the Alfa
Nord49, which is analogous to our case, the Judge hold that there is no right of set-off
for claims for damages for breach of contract, whether for loss of or damage to goods
or for alleged failure to prosecute a voyage with reasonable dispatch or otherwise
(which we denied and we will elaborate in the following arguments), against a claim
for freight. Therefore, in our case, “discountless” means that the Charterers should
pay the due freight in full unconditionally from the moment of lifting subject even the
Charterers filed a claim of damages thereafter, failure of which constitutes a
repudiatory breach of contract, which is also affirmed by judgments of the Dominique50.
3.5 Even though the Charterparty was terminated by the Charterers thereafter,
the Charterers are still liable to pay the due freight.
Contract termination by the Charterers did not affect the facts that the outstanding
freight still needs to be paid. “Both parties are discharged from further performance of
48
The Brede: Henriksens Rederi A/S v T.H.Z. Rolimpex [1973] 2 Lloyd’s Rep. 333; The Aries: Aries Tanker
Corporation v Total Transport Ltd. [1977] 1 Lloyd’s Rep. 334.
49 The Alfa Nord: A/S Gunnstein & Co. K/S v Jensen, Krebs and Nielsen [1977] 2 Lloyd’s Rep. 434
50 Ibid: The Dominique: Bank of Boston Connecticut) v European Grain & Shipping Ltd. [1989] 1 Lloyd’s Rep
431
15
the contract, but rights are not divested or discharged which have already been
unconditionally acquired. Rights and obligations which arise from the partial
execution of the contract and causes of action which have accrued from its breach
alike continue unaffected”51, quoted by the Judge in the Dominique52. The statement
indicates that contract termination did not affect the rights that are acquired before the
termination of contract. The reason of why the Charterparty is terminated or who is in
repudiatory breach of contract should not be taken into account as hold by judges in
the Dominique53, the Owner was repudiated the contract.
Therefore, in accordance with the principles of law referred to above, even if the
contract was rescinded by the Charterers, they should still pay the due freight the
resultant damages.
4. The Owners are not liable for any damages arising from the
delayed arrival.
4.1 The Charterers should not cancel the contract based on ETA clause.
The Charterers should not cancel the contract based on ETA clause. By clean recap
attached on email of 19 November 2011, the Owners and the Charterers agree that
ETA LOADPORT 3 DECEMBER 2011.54 Concerning ETA in shipping practice, the
starting point for any estimate of arrival time is to be found in information relating to
the current position of the vessel and the time at which it will be free from any
51
Mcdonald v Dennys Lascelles Ltd. [1933] 48 C.L.R. 457, 476-477, by Dixon J.
Ibid: The Dominique.
53 Ibid: The Dominique.
54 See Facts p47: Clean Recap.
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52
existing commitments.55 That is to say, ETA is merely an approximate estimate time
of arrival to loading ports, breach of which would not repudiate the contracts unless it
fundamentally prevents the performance of the Charterparty or an express obligation
for the owner has been incorporated into the Charterparty.
Corresponding to our case, the Owners have never undertaken any commitments to
ETA by the wording of relevant clauses of the Charterparty. Moreover, the Charterers
cancelled the contract ahead of the stipulated ETA56 where the Owners did not
actually breach of ETA clauses at the moments of the cancellation. Thus conversely,
if the Charterers terminate the Charterparty resting on the grounds that the Owners
violated the ETA clause, the Charterers’ unilateral termination of the Charterparty
constitutes a repudiatory breach of contract.
4.2 The Charterers should not cancel the contract based on laycan clause.
The Charterers should not cancel the contract based on laycan clause. The clean recap
provides that ETA load port is on 3 December 2011 at the very start.57 During the
Vessel in dispute performed its preliminary voyage, by reason of the Vessel being
arrested in bunker port, the Owner was unable to meet its ETA and LAYCAN as
prescribed in Charterparty.
The Charterers cancelled the Charterparty prior to the cancelling date constituting
anticipatory breach of contract. It is manifest that the right of cancellation could not
be validly exercised until the arrival of the cancellation date and any premature notice
55
Carriage of Goods by Sea by John F Wilson 6th edition (Pearson Longman).
See Facts p47: ETA clause of Clean Recap; p96: email on 27 November 2011.
57 See Facts p47: Clean Recap.
17
56
purporting to cancel the contract constitutes an anticipatory breach and repudiation of
the Charterparty.58 Laycan is not specific feature of voyage charters only, it is
habitually used in the negotiation of charterparties, to refer to the earliest date at
which the laydays can commence and the date after which the charter can be
cancelled if the vessel has not by then arrived.59By custom rules, the Charterparty
would create a right of cancellation of contract for the charterer but only limited to a
time period. The charterer is not allowed to prejudge the issue by repudiating the
charter before the cancelling date even though it is physically impossible for the
chartered vessel to arrive at the loading port by that date.60 By case of The Simona61,
the judgments hold that the charterers constituted an anticipatory breach of the charter
while the charterers refused and gave notice of cancellation of the charter when the
owners request an extension of the cancelling date prior to stipulated laycan.
Analogous to our situation, as agreed in recap, it provides that LAYCAN 5-6
December 2011 (0001-1500HRS) to be narrowed down to one day in chopt.62 And by
email of 22 November 201163, the Charterers changed the laycan to 5th December.
That means the Charterers could only cancel such charter party later than 5 December.
However, by Notice of Cancellation on 27 November 2011 sending by the Charterers,
the Charterers cancelled the Charterparty prior to the 5 December. Thus, the
Charterers constitute an anticipatory breach of contract upon such Notice of
58
The Simona [1988] 2 Lloyd's Rep. 199; Mihalis Angelos (1970) 2 Lloyd’s Rep. 43.
Tidebrook Maritime Corporation v Vitol SA of Geneva [2006] EWCA Civ 944 at para 38: Rix LJ.
60 The Mihalis Angelos [1971] 1 QB 164; The Helvetia-S [1960] 1 Lloyd’s Rep 540.
61 The Simona: Heymans v Darvins Ltd [1942] AC 356 at p361.
62 See Facts p48: Clean Recap
63 See Facts p92: Email of 22 November 2011.
18
59
Cancellation.
Therefore, the Owners did not breach of contract because of the Vessel missing its
laycan. Conversely, the Charterers cancelled the Charterparty prior to the cancelling
date constituting a repudiatory breach of contract.
4.3 The Charterers should not cancel the contract based on the warranty clause
of reasonable dispatch.
Whether the Charterers are entitled to cancel the Charterparty based on Clause 1 of
ASBATANKVOY64 subjected to two main issues. First whether the Owners are in
breach of such obligation to proceed to the loading ports with reasonable dispatch.
Second is in alternative, even the Owners breached such stipulation, does it
sufficiently entitle the Charterers terminate the contract?
First, the Owners do not consider the delay occurred in preliminary voyage as breach
of reasonable dispatch. Performance of this obligation is judged, not on a strictly
objective basis, but in relation to what can reasonably be expected from the shipowner
under the actual circumstances existing at the time of performance65. So long as such
delay is attributable to causes beyond his control, and he has neither acted negligently
nor unreasonably, the shipowner is duly full his obligations notwithstanding
protracted delay.66 In this present case, although the Owners were obligated to
proceed to the loading port with convenient dispatch,67 the delay was caused by
Charterers’ breach, which means that Owners would have enough funds to pay the
64
See Facts p54.
Carriage of Goods by Sea by John F Wilson 6th edition (Pearson Longman).
66 The Kriti Rex [1996] 2 Lloyd’s Rep 171.
67 See Facts p54, at 1.
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65
bunker fee if the Charterers had paid the freight on time strictly in accordance with
the Charterparty.68 In addition, the delay was a fact of life and was totally out of
Owners’ expectation. Therefore, Owners should not be considered as act negligently
or unreasonably, and the delay in approach voyage cannot be deemed as breach of
reasonable dispatch.
Alternatively, even if the Owners breached the obligation of proceeding to the loading
port with reasonable dispatch, the Charterers could not terminate the Charterparty.
Pursuant to the Clause 1 WARRANTY-VOYAGE-CARGO of ASBATANKVOY69,
it stipulates that the vessel shall with all convenient dispatch proceed as ordered to
Loading Port named in accordance with Clause 4 thereof. Whether the clause pertains
to a condition or warranty is in determination of the justification of the Charterers
cancelled the Charterparty by reason of the Owners in breach of such clause. Even if
the title of the Clause defines such clause as WARRANTY (the opposite of
Representation not Condition), it does not entitle the Charterers a right of cancelling
the Charterparty70 while the Owners fail to prosecute the preliminary voyage with
reasonable dispatch. Such clause designates the Owners an obligation of sailing to the
loading port with reasonable dispatch, however, breaching of which the Owners may
not certainly constitute repudiation to the Charterparty. The essence of such clause
68
Fact P93 at Para2
See Facts p54.
70 The Seaflower: BS&N Ltd (BVI)v Micado Shipping Ltd [2001] 1 Lloyd`s Rep.341. Waller LJ concludes that the
following term of a contract should be considered as a condition …(iii) if it is so designated in the contract or if the
consequences of its breach, that is, the right of the innocent party to treat himself as discharged, are provided for
expressly in the contract: or…; Another case distinguished from our case is the Wickman v Schuler [1974] AC 235
where the clause expressly allows the charterer to terminate the contract if the vessel is not delivered by a specific
date.
20
69
does not always follow the parties’ intention or the wording of the terms, however,
this is mostly a question of fact fit for the determination of a jury.71
Further and most importantly, by authoritative case The Hong Kong Fir72where the
judgments admit the existence of intermediate clause in contract that falls into neither
Condition nor Warranty, there are some terms, the consequences of the breach of
which may range from the trivial to the very serious, for instance, seaworthiness is a
typical intermediate clause. The essential criteria established in The Hong Kong Fir to
determine that whether one party breach of an obligation entitles the other party to
cancel the contract is that whether the occurrence of those events deprived the
charterers of substantially the whole benefit which it was the intention of the parties
as expressed in the charter-party that the charterers should obtain from the further
performance of their own contractual undertakings.73 If the non-performance or
defective performance in breach of contract goes against the whole root to the
contract, the innocent party could terminate such clause, if not, he merely can claim
for damages for such stipulation breach74. In connection with our situations, both
parties knew that if Reliable Butterfly could not sail from the bunker port by 25
November, it could not meet the laycan.75 And Charterers chose to terminate the
Chaterparty,76, it could not be concluded that Charterers thereupon were deprived of
71
The Hong Kong Fir: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26, para 41.
Ibid: supra
73 Ibid: supra, para 61. Also affirmed by Mersey Steel & Iron Co. v. Naylor, Benzon & Co. (1884), 9 App. Cas.
434, at P. 444; Heyman v. Darwin, Ltd., [1942] A.C. 356, at P. 397; Suisse Atlantique Societe’d Armement
Martime S.A. v. N.V. Kolen Centrale [1967] 1 A.C.361, at P.422; Cehave N.V. v. Bremer Handelsgesellschaft,
[1976], Q.B. 44, at PP.60, 73; Federal Commerce & Navigation Co. Ltd. v. Molena Alpha Inc., [1979] A.C. 757, at
P.779.
74 Jackson v Union Marine Insurance Co (1874) LR 10 CP 125.
75 Fact P94
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72
the substantial whole benefit under this Charterparty. Therefore, even though even if
the Owners breached the obligation of proceeding to the loading port with reasonable
dispatch, the Charterers thereon could not terminate the Charterparty.
Since that the Charterers may not resort to contract cancellation, the only remedy is to
claim for damages if any. However, in this case, the Charterers did not suffer any
actual losses relying on the delay.
Above all, the Charterers could not cancel the Charterparty based on Clause 1 of
ASBATANKVOY, and if they did so, the cancellation constitutes a repudiatory
breach of contract.
4.4 In presence of arguments above, the Owners are not liable for damages and
losses arising from delayed arrival.
Relying on all analysis above, if the Charterers elect to cancel the Charterparty based
on the grounds that the Owners were in breached of ETA or laycan clause or the
Owners failed to proceed to the loading ports with reasonable dispatched, the
Charterers constitutes a repudiatory breach of contract if they cancelled the
Charterparty based on grounds above.
5. If the Charterers elect to cancel the contract based on the Owners
Standard Terms Clause 2, they should not claim any damages against
the Owners.
5.1 The Owners’ Standard Terms Clause 2 applied.
The Owners’ Standard Terms Clause 277 applied therefore since the Charterers should
76
77
Fact P96 “Super Charters Inc.’s E-mail”
See Facts p87: The Owners Standard Terms.
22
not rescind the Charterparty based on the grounds mentioned above.
5.2 The Charterparty was cancelled in a “without recourse” way.
The Charterers contend that the Owners’ Standard Terms Clause 2 is amended so as
to displace the Owner’s usual regime of releasing them from liability.78 However,
Clause 2 is not an exemption clause that it does not purport to exclude the Owner’s
liability for breach of an obligation79. Since it is not permitted to rescind the
charterparty prior to the cancelling date unless the result of the breach is so substantial
to frustrate the object of the contract80, in commercial practice the solution to the
problem is to insert a clause entitling the charterer to cancel the charter while the
vessel have arrived by a specified later date81. Thus the Clause 2 of the Owners
Standard Terms is a contractual option for the Charterers to cancel the Charterparty
that is not subject to the cancelling date if the condition prescribed in the Clause 2
satisfies. Whereas, when the Charterers invoke such clause, the Charterparty could
only be rescinded the Charterparty in a “without recourse” way. The construction of
“without recourse” is that once the Charterers elects to cancel the contract by
invoking such clause, they could not claim any damages against the Owners. The true
construction goes to commercial custom.
78
Facts p111: The Charterer’s Submission.
The Unfair Contracts Terms Act 1977, Clause 13:“To the extent that this Part of this Act prevents the
exclusion or restriction of any liability it also prevents – (a) making the liability or its enforcement subject to
restrictive or onerous conditions; (b) excluding or restricting any right or remedy in respect of the liability, or
subjecting a person to any prejudice in consequence or his pursuing any such right or remedy; (c) excluding or
restricting rules of evidence or procedure; and (to that extent) section 2 and 5 to 7 also prevent excluding or
restricting liability to reference to terms and notices which exclude or restrict the relevant obligation or duty.”
80 Jackson v Union Marine Insurance Co (1874) LR 10 CP 125.
81 Ibid: The Madeleine [1967] 2 Lloyd’s Rep 224.
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79
5.3 The Charterers should not claim any damages against the Owners.
If the Charterers elect to cancel the Charterparty based on the Clause 2 of the Owners
Standard Terms, the Charterers could not claim any damages resulting from the
delayed arrival. Thus, above all, the Owners are not liable for damages and losses
claimed by the Charterers.
PRAYER FOR RELIEF
For the reasons submitted above, the Owners respectfully request this Tribunal to:
DECLARE that the Charterparty between Owners and Charterers is cancelled.
Further,
ADJUDGE that the Charterers are liable to the Owners for:
The sum of USD 4,935,368.75 by way of freight or damages in the same amount,
interest, costs, and further of other relief.
Further,
ADJUDGE that the Owners are not liable to the Charterers for increased freight USD
824,000;
Further,
ADJUDGE that the Owners are not liable to the Charterers for sums due and payable
to the loadport terminal/sellers pursuant to the relevant sale contract for delayed
arrival in USD 100,000.
24
Further and alternatively,
ADJUDGE that the Owners are not liable to the Charterers for sums due and payable
to the disport terminal/sellers pursuant to the relevant sale contract for delayed arrival
in USD 300,000.
25